How to Pay Off Credit Card Debt in 2021


For many people, the new year means new goals. After a year ridden with financial hardship thanks to a global pandemic, financial goals may be at the top of a lot of resolution lists. At the start of 2020, American consumers reached a record high of $4.2 trillion in debt. Though consumer debt declined during the pandemic, Americans still share an estimated $980 billion in revolving debt, which is mostly from credit cards.

Paying off your credit card debt is a great start to improving your financial health in 2021, but how can you do it? Here are a few payment strategies and tips for success.

Four payment strategies for credit card debt

1. Debt Snowball

Credit card debt can easily become overwhelming with mounting interest constantly driving up the balance just as quickly as you can make a payment. It is easy to feel like you are not making any progress. But, instead of feeling defeated, focus on your payment success by prioritizing one card balance at a time.

In a debt snowball, the credit card with the smallest balance gets payment priority. While minimum payments are made on all other outstanding balances, any extra money you have is added to your payment for the card with the lowest balance. In other words, you always pay extra on the card with the lowest balance. Once you pay off one balance, you begin paying extra toward the next lowest balance. With every card that is paid off, you will feel a little more accomplished as you progress in paying off your credit card debt, one balance at a time.

2. Debt Avalanche

Like the debt snowball method, a debt avalanche prioritizes one card balance at a time – but prioritized interest rate rather than balance. Pay the minimum balance on every card, but always pay as much extra as you can afford on the card with the highest interest rate. The card with the highest interest rate is going to cost you the most over time, regardless of the balance. By prioritizing the higher interest cards, you can pay off these balances quicker to limit the amount of interest you will pay in addition to the actual balance. Once the card with the highest interest rate is paid off, move on to throwing extra money into your payment on the card with the next highest interest rate.

3. Debt Consolidation

By combining multiple credit card payments into one monthly payment through debt consolidation, you may be able to pay off your credit card debt quicker which will save you money in more ways than one. Whether you rely on a balance transfer credit card, loan, or line of credit to consolidate, you will likely get a lower interest rate and a shorter payoff period which means spending less money on interest and fees and paying off your debt quicker. Therefore, instead of juggling multiple credit card payments with varying due dates and high-interest rates, debt consolidation will make your debt more manageable with only one, low-interest payment to keep track of.

4. Debt Management Plan

Sometimes, you have access to the tools, but you need assistance using them. If you are struggling to manage your credit card debt, a debt management plan can help. Nonprofit credit counseling agencies can work with you to identify the best strategy for tackling your credit card debt and create an affordable plan for managing your payments. They may even be able to help you negotiate a lower interest rate and affordable payment plan with your creditors. You can find a list of legitimate credit counseling agencies here.

Sticking to the strategy

Once you have selected the strategy that works best for you, it is important to commit to repayment. The more money you can put into your debt repayment strategy, the quicker you will have your credit cards paid off. If you do not already have a budget, make one now. Allocate as much money as you can spare toward credit card payments. While it may make things tight for a while, this temporary strain will be well worth the reward of being debt-free.

If your budget is already strained due to limit resources, add more money into the equation. You can increase the amount of money you have to work with by reducing your expenses or increasing your income. Take inventory of your monthly bills. Where is your money going? Simple changes like eating out less, meal prepping, or even just shopping from a grocery list are easy ways to reduce food expenses. If you pay for a lot of luxuries, like multiple streaming services, movie channels, or the highest internet speed, consider suspending everything but one or two essentials to see savings that quickly add up.

Read more about Frugal Lifestyle Changes

When reducing your expenses is not an option or if you just want to maximize the amount of money you can throw at your credit card debt, explore your options for additional income. From driving for a ride-share or shopping for a grocery delivery service to picking up a more traditional part-time job, there are plenty of flexible options available for a side hustle. Find a way to supplement your income to speed up the debt repayment process.

Consult a professional

Yes, you can pick a debt repayment strategy on your own and proceed in making payments. However, sometimes it is helpful to work with a credit counselor who can set you up for success as you embark on your journey to paying off those credit cards. Credit counseling agencies offer personalized advice on money management. Counselors can help you develop your budget, provide you with materials and workshops to improve your money management skills, and help you identify the best strategy for tackling your debt based on your circumstances.